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Chuck DeVore- Contributor

Assemblyman Chuck DeVore represents 450,000 residents of Orange County California’s 70th Assembly District.. He served as a Reagan White House appointee in the Pentagon from 1986 to 1988 and was Senior Assistant to Cong. Chris Cox. He is a lieutenant colonel in the Army National Guard. Chuck’s novel, CHINA ATTACKS, sells internationally and has been translated into Chinese for sales in Taiwan. [go to DeVore index]

A Taxing View from the Golden State
How much is enough?…

[Chuck DeVore] 6/1/05


When it comes to state taxation and spending, how much is enough? More importantly, how much is too much? California only grapples with these questions when it has a Republican governor, otherwise the debate among Democrats centers around how fast to increase spending and taxes.

With capital gains swelling tax receipts in the 1999-2000 budget year, California collected an all-time high of revenue averaging $3,111 from every person in the state (in inflation adjusted 2005 dollars). With these record collections, the majority party set about to spend every nickel on new and existing government programs. When the boom subsided, the state was left with a persistent “structural” deficit of about $7 billion per year. The political consequence of this profligate spending was the wave of voter disgust that swept Governor Arnold Schwarzenegger into office in 2003.

With such a dramatic recent history, you would think Sacramento lawmakers would have learned a thing or two. Instead, in the 2005-2006 budget year now being considered in Sacramento, we will collect taxes at the second highest rate in our history while spending will top more than $8.44 per $100 of personal income.

What will all this tax money purchase? Health and welfare programs alone will top $32 billion of state money, eating up almost a third of the budget. Of course, those who lobby for the disadvantaged say it is not enough.

As with many other states and the Federal government, health care costs in California continue to mount, with cost drivers including medical inflation, an aging population and a loss of health insurance resulting from the loss of jobs. California’s health care costs are also impacted by the almost two million illegal immigrants whose 501,000 undocumented children use state health programs at a 30 percent rate compared to only 18 percent of the children of citizens. Lastly, during the heydays of the late 1990s, the Legislature voted to greatly expand health and welfare programs. These measures included: extending Medi-Cal to cover all residents up to the Federal poverty limit, paying family members greater wages to look after their disabled kin (they are now unionized), and making children’s health insurance available for families up to 250 percent of the poverty level. This mammoth expansion of government added 1.2 million new beneficiaries to Medi-Cal alone – making one out of every 30 Californians a new client of the welfare state.

In response, Schwarzenegger has proposed an overhaul of Medi-Cal, saving $332 million over five years by moving people in the system to HMOs and by charging more for doctor visits. Even though the savings are modest when compared to the size of recent program expansions, the governor’s plan is opposed by legislative advocates of the welfare state who are now emboldened by Schwarzenegger’s flagging poll numbers to renew their calls for tax increases.

The wisdom of the governor and his Republican allies in the Legislature holding firm on taxes last year has been borne out by huge revenue gains this year (see chart). The increased revenue came as the result of economic revival, not a higher tax burden – a point that is entirely lost on the Democratic majority in Sacramento.

The liberal demand for higher taxes comes at a perfect time politically. Schwarzenegger’s reform initiatives are likely headed for a November 2005 special election. These reforms coupled with the GOP’s no-new-taxes stance will offer Golden State voters a sharp contrast with the tax and spend status quo crowd that has dominated the statehouse for decades. CRO

copyright 2005 Chuck DeVore




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